@Adam Martin You will absolutely need an attorney to hammer out the details, but at a high level I would recommend the following structure:
- New LLC which both of you own 50/50
- That LLC pays your brother's PM company for management as a third party (he could charge slightly below what he might charge for other clients, but keep the asset management and the property management separate, and just treat PM as part of the asset's operating expenses)
- Rather than loan your brother money, you are the capital investor in the LLC, in which case you put up all the equity. Then, your equity will earn a preferred return, such as a 6% (could be simple interest or IRR). A preferred return means that all cash flow after expenses and debt service goes to you to pay back your principal AND the earned interest. After the principal and interest is paid in full, typically after a few years of cash flow and/or a refinance, then you and brother split the cash flow 50/50.
- In the event of a sale, if your principal and interest is already paid off, then you just split the proceeds 50/50. If principal and interest is not paid off at the time of a sale, that gets paid to you first, and then the remaining proceeds would be split 50/50
Agreeing on the rate of return for you cash investment is the key. Once you define those terms, you will need an attorney to make sure they're reflected in the Operating Agreement, and a CPA who understands the structure
